The Digital Revolution

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The Digital Revolution 1

You should spend about 20 minutes on questions 1-8 which are based on the Passage below.

Wheel of Fortune: Emma Duncan discusses the potential effects on the entertainment industry of the digital revolution A
Since moving pictures were invented a century ago, a new way of distributing entertainment to consumers has emerged about once every generation. Each such innovation has changed the industry irreversibly; each has been accompanied by a period of fear mixed with exhilaration. The arrival of digital technology, which translates music, pictures and text into the zeros and ones of computer language, marks one of those periods. B

This may sound familiar, because the digital revolution, and the explosion of choice that would go with it, has been heralded for some time. In 1992, John Malone, chief executive of TCI, an American cable giant, welcomed the '500-channel universe'. Digital television was about to deliver everything except pizzas to people's living rooms. When the entertainment companies tried out the technology, it worked fine - but not at a price that people were prepared to pay. C

Those 500 channels eventually arrived but via the Internet and the PC rather than through television. The digital revolution was starting to affect the entertainment business in unexpected ways. Eventually it will change every aspect of it, from the way cartoons are made to the way films are screened to the way people buy music. That much is clear. What nobody is sure of is how it will affect the economics of the business. D

New technologies always contain within them both threats and opportunities. They have the potential both to make the companies in the business a great deal richer, and to sweep them away. Old companies always fear new technology. Hollywood was hostile to television, television terrified by the VCR. Go back far enough, points out Hal Varian, an economist at the University of California at Berkeley, and you find publishers...
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